Tesla has been hit with an enforcement action by California’s Department of Insurance (CDI) for routinely denying or delaying customer claims despite years of warnings from the state regulator, according to a new pair of filings.
Tesla’s insurance arm, along with its partner State National Insurance Company, engaged in “willful unfair claims settlement practices” including “egregious delays in responding to policyholder claims in all steps” of the process and “unreasonable denials,” CDI wrote. This has allegedly caused “financial harm” and “distress to policyholders.”
CDI first approached Tesla about these issues in 2022, according to the filings, yet it claims things have only gotten worse. “In 2025, the Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined,” the regulator wrote.
Tesla and State National could face penalties up to $5,000 for each “unlawful, unfair, or deceptive act” and up to $10,000 for each “willful” act, according to the filings. The companies have 15 days to respond.
The enforcement action could have knock-on legal effects for Tesla. In July, the company was hit with a proposed class action lawsuit over allegations that the company purposely delayed and minimized claim payouts. CDI wrote Friday that Tesla’s actions may have created “potential third-party liability exposure.” Tesla and State National did not immediately respond to a request for comment.
Tesla launched its in-house insurance product in 2019. The idea was to offer cheaper premiums and faster service. But it got off to a rocky start. The website repeatedly crashed, and when it didn’t, it offered quotes that were far higher than owners expected. Still, Musk promised it would be a “revolutionary” product.
Just three years later, according to CDI’s filings, the regulator noticed a “marked uptick in claims-related consumer complaints” against Tesla. So in December 2022, CDI started meeting with Tesla and State National.
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The regulator said it learned Tesla’s “Head of Claims” position had been vacant for months. It also accused the companies of not reporting the claims-handling problems.
As a result, CDI subjected Tesla and State National to a sort of probationary period: the regulator monitored the companies’ efforts to reduce these violations for six months. Tesla and State National “conceded” that they had underestimated the volume of claims and the staffing required to handle them, according to CDI, and promised to beef up hiring.
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